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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The total quantity - or total output of a good produced at each quantity of labor employed






2. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






3. Entry (or exit) of firms does not shift the cost curves of firms in the industry






4. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






5. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






6. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






7. Demand for a resource like labor is derived from the demand for the goods produced by the resource






8. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






9. The price of a good measured in units of currency






10. When firms focus their resources on production of goods for which they have comparative advantage






11. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






12. A good for which higher income decreases demand






13. ATC = TC/Q = AFC + AVC






14. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






15. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






16. The output where ATC is minimized and economic profit is zero






17. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






18. Total product divided by labor employed. APL = TPL/L






19. The ability to set the price above the perfectly competitive level






20. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






21. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






22. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






23. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






24. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






25. Ed = (%dQd)/(%dP). Ignore negative sign






26. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






27. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






28. AVC = TVC/Q






29. Exists if a producer can produce a good at lower opportunity cost than all other producers






30. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






31. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






32. Ed < 1






33. Ei = (%dQd good X)/(%d Income)






34. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






35. Ed = 1






36. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






37. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






38. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






39. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






40. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






41. Ed > 1 - meaning consumers are price sensitive






42. AFC = TFC/Q






43. The difference between total revenue and total explicit costs






44. The practice of selling essentially the same good to different groups of consumers at different prices






45. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






46. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






47. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






48. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






49. The difference between total revenue and total explicit and implicit costs






50. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources